Fitch Ratings, a ratings agency, has lowered its assessment of the Colombian banking system from stable to negative. This means that Fitch Ratings is calling upon the country to strengthen its banking sector.
According to the newspaper El Espectador, the decision was criticized by the Financial Superintendence, which controls the operation of Colombian banks. They stated that the country has made the changes that have been needed in order to strengthen the banking system and conform to the international standards necessary to maintain high ratings with the ratings agencies.
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However, Bancolombia, one of the largest banks in the country, refuted the report from Fitch, arguing that proportion of outstanding loans within the portfolios of Colombian banks are within the permitted level of risk. Analysts at Bancolombia have described the nation’s banking system as healthy and protected.
The Financial Superintendency also added that the risk rating does not take into account the state of financial regulation in the country, which the entity says is the strongest when compared to other countries in the region. The figure that they emphasized is that the solvency of the banking sector that was 15.46% in October 2016, when the regulatory minimum is was only 9%.
It is expected that the Colombian government will continue to implement the necessary measures to comply with international standards, prioritizing measures to strengthen the Colombian financial system and thus prevent ratings agencies from taking similar action in the future.
However, state revenues have fallen recently, amid declining prices for commodities such as oil, coal, and iron.
Source: El Espectador